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International Internet Magazine. Baltic States news & analytics Sunday, 19.05.2019, 15:47

Swedbank's money laundering allegations will hit whole Baltic banking system

BC, Vilnius, 21.02.2019.Print version
The recently emerged allegations that Sweden's Swedbank was involved in the Danske Bank money laundering scheme in Estonia will have negative impact on the whole Baltic banking market which is viewed by many foreign financial institutions as a single region, experts have told LETA/BNS.

"The impact on the Baltic banking sector will undoubtedly be negative. In early 2018, the reputation of regional banks was hit by the collapse of Latvia's ABLV bank accused of money laundering. And the Danske Bank affair continues to make things even worse. If the allegations regarding Swedbank are confirmed, irrespective of the scale, it will be another blow for the Baltic states," Marius Dubnikovas, chairman of the Tax Commission at the Lithuanian Business Association, told.

Kestutis Kupsys, head of the association "For Fair Banking", says new facts show that both individual banks and national supervisions institutions are incapable of properly fighting money laundering, thus, tougher European banking regulation should be considered.

"Top-level supervision mechanisms and institutions for their implementation should be created in Europe for the banking and financial sector. Once proper funding for them is ensured, the supervision of the financial sector will be much more balanced. It's completely naive to expect that banks are capable of dealing themselves. They really not a flock of good sheep, they are closer to a pack of wolves," Kupsys told LETA/BNS.

In his words, the banking business has long become global, therefore, it simply impossible to have proper national-level supervision.

Dubnikovas believes that Lithuania's tough position on Russia has helped to reduce risks for the financial system. In 2012, the Bank of Lithuania banned Russia's Investment trade Bank (Investicionny Torgovy Bank) to open its representation in the country. And the share of non-resident deposits dropped under 3% in Lithuania after two bank, Snoras bank and Ukio Bankas, which worked actively with eastern countries, collapsed.

"With no doubt, the capital from the East, not only from Russia, but also from other countries where there are large volumes of illegally acquired money, is looking for gaps to get into the West. Lithuania is not attractive for such a capital, so it's natural bypassing the country which is skeptical towards it," Dubnikovas said.

In his words, in this case Latvia seems to be in the most complicated situation as non-resident funds make 40 or even more percent there. This is why Latvia might face the same problems the Cypriot financial sector, which was very much dependent on Russian capital, had several years ago, Dubnikovas says.

"This capital will migrate inevitably. The shadow capital has been nipped in Latvia and it's hard to expect a brighter future in this country. But for Latvia and its financial sector it can be a huge blow and its consequences will probably be felt for many years to come," Dubnikovas said.

Sergejus Muravjovas, head of the Transparency International Lithuanian Chapter, told that even if it turns out that Swedbank's branch in Lithuania or the country's other businesses were involved in the Swedbank's story, it is unlikely to get major public attention in Lithuania as the whole case will be overshadowed by the expanding judicial corruption probe.

"A lot will depend whether Swedbank's Lithuanian branch or other businesses operating in our country were involved in the Swedbank money laundering scandal. But I wouldn’t be surprises if the public failed to give due attention to these events. For example, I doubt that the high-profile Telia corruption case, which rocked the world several years ago, was widely discussed at the kitchen table in Lithuania. The judicial corruption case is much closer to all of us," Muravjovas told.

But, he added, recurring corruption and money laundering scandals cannot not to affect the ethical and transparent business image being promoted by the Swedish business community.

"If the allegations are confirmed, with no doubt, a lot will depend on Swedbank representatives' reaction and their ability to convince the business community and supervisions institutions that the bank managed to resolve those problems. Otherwise, I wouldn't know why people would want to have anything to do with a negligent or corrupt bank," Muravjovas said.

The Swedish media reported on Tuesday that Swedbank could have been used for money laundering schemes via Danske Bank's Estonian unit for almost a decade. The Swedish SVT television channel claimed that money transfers between Swedbank and Danske Bank's Estonian branch could have exceed 40 billion Swedish krona (3.8 bn euros) in 2007-2015, and that could have been money laundering as the money went through the account of around 50 non-active companies.

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